MSME bodies seek urgent liquidity, faster refunds to offset US tariff hit

MSME bodies urge emergency credit, faster RoDTEP and GST refunds, and targeted relief measures to protect exporters from US tariff hikes impacting margins and employment

Industry associations representing micro, small and medium enterprises (MSMEs) have written to the Union ministries of finance and commerce seeking urgent intervention to cushion exporters from the impact of the recent tariff hikes by the United States.

 

They warned that this move by the US is already compressing margins and threatening jobs in key sectors.

 

Citing “immediate stress” on cash flows in clusters dependent on US buyers — including textiles, engineering goods and gems & jewellery — small and medium enterprise (SME) bodies said the higher duties have forced exporters to either absorb additional costs or lose orders.

 

“Either way, it tightens operating cash flows, lengthens receivable cycles, raises working capital needs for production and shipping, and worsens credit access for MSMEs that depend on small margins and quick turnovers,” said Vinod Kumar, president at the India SME Forum.

 

The letter dated August 9, reviewed by Business Standard notes that while several policy levers already exist — such as the government’s ₹20,000 crore Export Promotion Mission— these measures must now be deployed in targeted, time-bound ways to prevent production stoppages and layoffs.

 

The letter further said that the short-term asks include an “emergency liquidity corridor” on the lines of the earlier Emergency Credit Line Guarantee Scheme (ECLGS), routed through the Small Industries Development Bank of India (Sidbi), public sector banks (PSBs) and non-banking financial companies (NBFCs).

 

“This would feature pre-approved Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), top-up guarantees and concessional interest rates for tariff-hit clusters, with a target disbursement time of seven days for pre-verified firms,” the letter said.

 

In the near term (1–6 months), the associations have sought fast-tracking of Remission of Duties and Taxes on Export Products (RoDTEP) and goods and services tax (GST) refunds for export-facing MSMEs, aiming for processing within 7–10 days for certified clusters.

 

They have also recommended subsidised micro-insurance premiums by Export Credit Guarantee Corporation (ECGC) to help small exporters venture into newer, riskier markets without full balance-sheet exposure.

 

For the medium term (6–18 months), the letter calls for digitisation of CGTMSE claim processing and eligibility checks — including instant pre-qualification and paperless claims. This is to speed up lending, alongside cluster-specific relief packages such as temporary tax rebates or loan repayment moratoria for worst-hit hubs like Punjab’s and Tiruppur’s textile sectors and Ludhiana’s engineering cluster.

 

As a structural (12–36 month) priority, the industry groups propose blended finance windows, combining government risk-sharing, concessional credit lines from multilateral development banks, and Small Industries Development Bank of India (Sidbi)/National Bank for Agriculture and Rural Development (Nabard) co-funding. 

 

This is to support export market diversification, certification facilities, and bonded warehouses.

 

They also urge simplified loan products, pre-approved digital export documentation tools, and one-click applications for ECGC and RoDTEP claims to improve financial literacy and ease of access.

 

“The building blocks are in place, but speed and targeting will decide whether MSMEs survive the tariff shock,” the letter added.